Solving for Tax Complexities when Selling Globally

Jacquelyn Kyle, Senior Director of Strategy and Corporate Development, Digital River in collaboration with Craig Reed, GM, Cross-Border, Avalara
28 January 2022 | 36 Shares

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For ecommerce brands selling across borders, managing global taxes is highly complex and critical to get right. The obvious first “must” is to comply with local tax laws, ensuring compliance with all local rules and regulations while remitting the correct amounts to the correct authorities. While some governments’ tax authorities can be slow to move, when they do, they can come down on unwary organizations with significant weight – and the financial repercussions can be immense.

Additionally, the overall customer experience and the element of trust between your customers and your brand is crucial. If there is no mention of applicable sales taxes and duties, whether local, state, or national, many would-be customers will simply avoid buying from a brand. Or, worse yet, if they are faced with these taxes and duties for the first time upon delivery, your chances for a return customer are highly unlikely. Brands not only have to dot their I’s and cross their T’s, but must be actively doing so in each locale they sell into. Today’s shoppers expect secure and compliant transactions without hidden fees, no matter where they are in the world.

Tax Compliance

Source: Digital River

However, managing tax on a global scale is a highly complex undertaking for any brand selling their products online. It’s difficult – and risky – for a business to scale quickly into new territories without understanding and complying with appropriate tax laws and calculating accurate tax rates.

Additionally, there is the overhead involved with registering with the right authorities, electronically filing tax records, and finally remitting payments to the appropriate tax jurisdictions. While the commercial opportunities in a new market may be very attractive, each territory comes with new complexities that must be solved to operate properly.

All this to be said, you don’t have to do it alone. There are highly specialized, expert partners that can advise on – and implement – the correct procedures for brands to sell across borders and in overseas markets. Until now, doing so either required manual implementation into an existing payments platform, or creating a new instance of a proprietary tax calculation software installation.

Digital River’s partnership with tax specialist Avalara means that brands can now leverage a powerful single solution to simplify international tax complexity. Unifying Avalara’s world-class tax automation technology with Digital River’s powerful APIs and experienced global ecommerce professionals results in a comprehensive one-stop-shop for protecting global ecommerce sales.

Digital River and Avalara customers benefit from tax automation technology that works in the background. Working with different tax authorities in different jurisdictions is seamlessly handled by this technology, ensuring compliance in multiple geographies around the world where legislation varies greatly. Even U.S. companies operating domestically need to navigate over 11,000 different local and state tax jurisdictions, each with unique requirements. Selling in the E.U. involves handling VAT variations for 27 member states with different rates ranging from 17-27%, dependent on geography and goods traded.

Tax Compliance

Source: Digital River

Finance and ecommerce managers who have sold products across borders are aware that there are complex variations in tax laws: certain goods are subject to zero-rate, others to different bands of tax such as luxury taxes or reduced tax rates on specific goods or services. Instead of manually combing through what may be thousands of transactions to determine the correct tax amounts for each line item, Digital River and Avalara handle it. Furthermore, the technology is automatically updated when legislation or categorization in any geography changes, meaning you don’t have to keep track of constantly changing local rules and regulations.

Digital River enables brands to register with appropriate authorities, charge their customers the correct rates according to locale and product categories, file tax returns electronically, and settle what’s due with the appropriate government department. Together, Digital River and Avalara shoulder the burden of tax complexities and manage these challenges, allowing brands to plan strategically while leaving compliance and localization requirements to the experts.

To eliminate the complexity of international taxes, ensure compliance, and enhance your reliability and reputation with consumers, consider partnering with Digital River and Avalara. The combination of an experienced global ecommerce enabler backed with proven tax automation technology allows brands to scale quickly in new markets and reduce global liability while being able to focus on their core competencies.

Learn more about how Digital River and Avalara can help simplify global tax complexities for your brand here.